Zeek affiliates seek to thaw 'e-wallets'

Three people who earned money through the alleged Ponzi scheme, Zeek Rewards, are asking the court to release funds tied up in thousands of "e-wallets."

BY NASH DUNNThe Dispatch

Three people who earned money through the alleged Ponzi scheme, Zeek Rewards, are asking the court to release funds tied up in thousands of "e-wallets."The former program affiliates, David Sorrells and David and Mary Kettner, who say they represent thousands of others like them, allege their "e-wallet" accounts were unjustly frozen and the court-appointed receiver has no right to their money. Seeking an emergency evidentiary hearing before a U.S. District Court judge, the trio filed their second motion in two weeks in U.S. District Court on Tuesday for an order requiring the release of all third-party, "e-wallet" accounts.When the federal government shut down Zeek Rewards nearly four months ago, a court order issued an emergency freeze for all funds connected to the program, its parent company Rex Venture Group LLC, and the operation's former chief executive officer and Lexington resident, Paul Burks. That freeze included millions of dollars in "e-wallet" account companies, Payza/Alert Pay, NxSystems, Inc., and SolidTrustPay. An "e-wallet" allows Internet users the ability to make electronic transactions. Paypal, used by various companies including eBay, is one of the most popular "e-wallets." Court-appointed receiver Kenneth Bell, who is collecting money for about 800,000 users who lost out with Zeek Rewards, said he has seized about $43 million from "e-wallets" in the name of either Rex Venture Group or Burks, according to Bell and court records.However, thousands of the estimated 2.2 million total Zeek Rewards affiliates also used "e-wallets." While Bell estimates that about 100,000 affiliates profited from the program, it is unclear how many users had actual "e-wallet" accounts.The U.S. Securities and Exchange Commission halted Zeek Rewards on Aug. 17, alleging that the program and its related companies raised more than $600 million from nearly 1 million affiliates across the world. The SEC called the operation a "classic" example of a Ponzi and pyramid scheme. Launched in 2011, Zeek Rewards was one of the first penny auction-based companies to present profit-sharing opportunities to its customers. Its users, or affiliates, bought in with the program by purchasing large quantities of bids for the penny auction site Zeekler.com, which was also operated by Rex Venture Group. To earn a profit, affiliates were required to give those bids away to new customers and post a daily advertisement for the site online. For buying bids, giving them away and placing an ad, affiliates shared in the company's daily net profits through "rewards" — bonuses they could compile over time and eventually turn into cash.Affiliates moved money in and out of the program through their personal "e-wallets." The Kettners and Sorrells, who had "e-wallet" accounts with NxSystems, said they have not had access to their money since Aug. 20. Sorrells had an "e-wallet" balance of $373,375.66; David Kettner had a balance of $33,626.80; Mary Kettner had a balance of $25,319.67, according to their motion.They allege, while the original court order appointing Bell allowed him to marshal and collect funds in the name of Burks and Rex Venture Group, it did not give him access to their personal accounts. That "claw back" type of litigation has yet to be approved by the courts. "The funds in the 'e-wallet' accounts had been distributed on a final basis to (the Kettners and Sorrells), and others similar situated," according to the motion. "Once distributed, (Burks and Rex Venture Group) no longer had any interest whatsoever in those funds. Therefore, those funds were and are the property of (the Kettners and Sorrells), and other owners of 'e-wallet' accounts whose funds were seized." The former affiliates allege that Bell has stated he had no initial intentions of freezing their personal accounts, adding that he has yet to stop the "e-wallet" companies from freezing or transferring their money. The affiliates said they seek an emergency hearing because some "e-wallet" companies have begun transferring funds out of their frozen accounts to the receiver. Representatives with NxSystems, for instance, told its customers last week that any payouts from Zeek Rewards have been removed from customer accounts and turned over to Bell, according to a notice from the company dated Dec. 6. Bell told The Dispatch last week that "e-wallet" companies have their own customer relationships with their account holders. Those customer relationships are none of his business, he said. "The court's order freezing receivership assets does cover Zeek and Rex Venture money and assets," Bell said. "We've recovered many millions of dollars from e-wallets and other financial institutions, from Paul Burks and Zeek. E-wallets and other financial institutions are also determining if any receivership assets are in individuals' accounts. While I have not asked the e-wallets to freeze any individual accounts, other than Paul Burks, they are exercising their own due diligence."Bell has made it clear in recent weeks that he intends to go after those that profited through Zeek Rewards. He sent out about 1,200 subpoenas to the largest profiteers on Oct. 31, requesting documents related to the company, asking affiliates to surrender their gains and threatening future legal action. Last week, he said while some are opposed to the subpoenas, others have entered settlement negotiations. All Zeek Rewards affiliates may learn more about Bell's take on the "e-wallet" situation and other matters when he hosts a one-hour web conference call next week. Bell announced he will take questions about the receivership at 5 p.m. on Monday. The conference call can be accessed online through a link on www.zeekrewardsreceivership.com, or by calling 1-855-749-4750 and entering the access code 669-382-018. Bell said he encourages anyone with questions to email them beforehand to zeekrewardcall@mcguirewoods.com. While he said he will not be able to address individual account questions, he will be more than happy to answer any inquiries about the process, the progress he's made, estimated timelines, or even rumors affiliates have heard regarding the receivership. The conference call will be recorded, so it can be accessed at a later time. For more information, go to www.zeekrewardsreceivership.com. Nash Dunn can be reached at 249-3981, ext. 227, or at nash.dunn@the-dispatch.com.

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